Chinese electronics and appliance maker Haier has signed a “definitive agreement” to buy General Electric’s century-old appliance division for $5.4 billion.
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The deal will also be subject to customary regulatory filings in China and antitrust approvals in other countries, said a person authorized to speak on behalf of Qingdao Haier Co Ltd, the Haier unit making the purchase.
The deal, which values GE Appliances at 10 times the last 12 months of earnings before interest, taxes, depreciation and amortization, according to GE, was reported earlier by The Wall Street Journal.
The move is sure to please the Chinese government, to which Haier has close ties, which is trying to re-balance its economy more towards consumption and away from the infrastructure and investment-driven model of the past. Shanghai-listed Qingdao Haier, whose shares have been halted since October 19, will continue to be suspended on January 18.
The deal, which will be funded through the company’s capital and loans, will need anti-trust approval from authorities in U.S., Mexico, Canada and Colombia. The scale of the acquisition this time around, though, sets it apart as the combined value of the company’s previous deals is just $6.3 billion, according to Dealogic. The company viewed the technology fluency of the local workforce, 55 educational institutions and continued research and development funds in the state as better ecosystem for its two core business units – industrials manufacturing and data analytics. As part of the deal, Louisville will remain the headquarters of GE Appliances.
Officials expect the transaction to be completed in mid-2016.
The new pact represents a significant premium over the $3.3 billion Electrolux agreement, which was canceled amid objections from US antitrust regulators.
Hainer has already announced that it intends to keep the current management of GE Appliances, including CEO Chip Blankenship.
The two companies said GE Appliances would gain more access to the growing Chinese consumer market.
Qingdao Haier’s shares have been suspended from trading since October pending news of major corporate transactions.
Moreover, Justice Department Lawyer Ethan Glass indicated that the acquisition by Electrolux could lead the appliances to rise as much as 5%.
Mr. Zhang built the brand by investing in a cartoon in the 1990s called the “Haier Brothers”, creating mascots that generations in China came to recognize long after the airing of the more than 200 episodes.
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Additionally, Haier and General Electric announced collaboration in the field of Industrial Internet, healthcare and advanced manufacturing.
